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INDORE INSTITUTE OF LAW

NATIONAL LAW FEST

LEX BONANZA 2014


MOOT COURT COMPETITION

(27th 28th SEPTEMBER 2014)

BEFORE THE HONBLE CITY CIVIL COURT OF MUMBAI

SUPREME CONSTRUCTION CONSORTIUM (APPEALANTS)


Vs
INVESTMENT ADVISORS INDIA LIMITED (RESPONDENTS)

MEMORIAL FOR THE RESPONDENT-INVESTMENT ADVISORS INDIA LTD.

TABLE OF CONTENTS

INDEX OF AUTHORITIES------------------------------------------------------------------ 2
............................................................................................................................................
STATEMENT OF JURISDICTION--------------------------------------------------------- 7
............................................................................................................................................
SUMMARY OF FACTS---------------------------------------------------------------------- 8
............................................................................................................................................
SUMMARY OF ARGUMENTS------------------------------------------------------------- 9
............................................................................................................................................
ARGUMENTS ADVANCED----------------------------------------------------------------- 10
............................................................................................................................................
PRAYER----------------------------------------------------------------------------------------- 13
............................................................................................................................................

INDEX OF AUTHORITIES
BOOKS
THE CONSTITUTION OF INDIA
THE LAW OF TORTS; R.K BANGIA
THE CONTRACT AND SPECIFIC RELIEF ACT; AVTAR SINGH
INDIAN CASES
Reciprocal Promises
---------------------------------------------------------------------------------------------------------------1. PULIYADI NAVANNA ELLARAYAN vs KUTTUVA CHINA KUNA MUNI
NAGENDRA
(14 March, 1917)
....................................................................................................................................................
2. OU vs CIBA INDUSTRIAL WORKERS' CO-OP
(11 May, 2012)
....................................................................................................................................................
3. OS vs ADV. SRI.P.GOPALAKRISHNAN
(28 July, 2009)
---------------------------------------------------------------------------------------------------------------Severability
4. SHIN SATELLITE PUBLIC Co. LTD. vs M/s JAIN STUDIO LTD.
(30 January, 2006)
---------------------------------------------------------------------------------------------------------------SEC 55
5. PURE PHARMA LIMITED VS UNION OF INDIA
( 2 July, 2008)
....................................................................................................................................................
6. TENCO PRIVATE LTD vs THE KSEB
(23 December, 2009)
....................................................................................................................................................
2

7. AYANG RINPOCHE vs SMT SURAKSHA GUPTA AND OTHER


( 2 July, 2008)
....................................................................................................................................................

8. BHAGWAN DAS METALS LTD. vs M/s RAGHVENDRA AGENCIES


(14 June. 2011)
....................................................................................................................................................
9. M/s CITADEL PHARMACUTICALS vs M/s RAMANIYAM REAL ESTATES
(8 August, 2011)
---------------------------------------------------------------------------------------------------------------SEC 37
10. GAURAV ARORA vs OM PRAKASH & ANR.
(17 August, 2010)
....................................................................................................................................................
11. HOTEL VRINDA PRAKASH REPRESENTED vs KARNATAKA STATE
FINANCIAL
(21 August 2007)
---------------------------------------------------------------------------------------------------------------SEC 73
12. IQBAL PROPERTIES PVT. LTD. vs ATAR SINGH
(24 November, 2010)
....................................................................................................................................................
13. E. BHAGWAN DAS VS DILIP KUMAR AND OTHERS
(12 March, 1998)
....................................................................................................................................................
14. BHAGWANDAS METALS LTD vs M/S.RAGHAVENDRA AGENCIES
(14 June, 2011)
----------------------------------------------------------------------------------------------------------------

SEC 74
15. STATE OF KARNATAKA vs SHREE RAMESHWARA RICE MILLS
(AIR 1987 SC 1395)
---------------------------------------------------------------------------------------------------------------SEC 126
16. ASHOK MAHANSING BAJAJ H.U.F. vs ELEGANT PHARMACEUTICALS LTD.
( 14 February,2000)
....................................................................................................................................................
17. M/S. GLOBAL INFOSYSTEM LTD. vs M/S. LUNAR FINANCE LTD
(28 May, 2012)
....................................................................................................................................................
18. SHRI RAJAN GUPTA vs BANK OF INDIA
(22 August, 2007)
---------------------------------------------------------------------------------------------------------------SEC 54
19. NATHULAL VS PHOOLCHAND
(16 October, 1969)
....................................................................................................................................................
20. 1970 AIR 546, 1970 SCR (2) 854
---------------------------------------------------------------------------------------------------------------Other Cases
21. UNION OF INDIA vs TANSEM SINGH
[ 2008 (118) Fac LR 1079 (SC) (A) ]
....................................................................................................................................................
22. ASHOK KUMAR vs STATE OF BIHAR
[ AIR 2008 SC 2723 : 2008 AIR SCW 4533 : 2008 (8) SCC 445 ]
....................................................................................................................................................

23. ORIENTAL BANK OF COMMERCE vs SUNDAR LAL JAIN


[AIR 2008 SC 1339 (A): 2008 (2) SCC 280: 2008 (1) Scale 298]
....................................................................................................................................................
24. VISHWANATH SARAGOI vs RAVI BHATIA
[2008 AIR SCW 3779:2008 (4) ACJ 632 : 2008 (2) Scale 675]
....................................................................................................................................................
25. GAMMON INDIA LTD. vs M.S REDDY & CO.
[2004 (13) SCC 359]
....................................................................................................................................................
26. GANPAT METALS vs MSTC LTD
[2005 (12) SCC 169]
.....................................................................................................................................................
27. K. C SKARIA vs GOVERNMENT OF STATE
[AIR 2006 SC 811 (E) : 2006 AIR SCW 265 : 2006 (2) AIR Kar R 93 : 2006 (2) SCC
285 : 2006 (1) Scale 204]
......................................................................................................................................................
28. FOOD CORPORATION OF INDIA vs M/S LAXMI CATTLE FEED INDUSTRIES
[AIR 2006 SC 1452 : 2006 AIR SCW 1043 : 2006 (2) SCC 699]

FORIEGN CASES
29. SIM vs STRECHES
(1936 52 TLR 669,671)
---------------------------------------------------------------------------------------------------------------Breach of Duty
30. BOLTON vs STONE
(1951 AC 850)
----------------------------------------------------------------------------------------------------------------

SEC 73
31. HORNE vs MIDLAND RAILWAY
(1873 LR 8 CP 131)
.....................................................................................................................................
32. COLUMBIA SAWMILL Co. vs NETTLESHIP
(L.R.3 C.P. 499,509)

STATEMENT OF JURISDICTION

The Respondent humbly submits this memorandum in response to the appeal filed before this
Honourable Court.

SUMMARY OF FACTS
1.

Investment Advisors India Ltd. (IAIL), an Indian Company, is a growing private equity firm
based in Mumbai which had an annual turnover of Rs. 200 Crore for the fiscal year 2005-2006.

2.

Supreme Construction Consortium (SCC), an Indian company which is a well known real
estate contractor, acquires a reputed name in the same for the execution of several prestigious
building contracts for top corporate houses over the years.

3.

In a Board Meeting called on June 2005 IAIL decided that it will setup its own corporate
house in Mumbai and a month later procured a piece of land from NMRDA at BKC for the
aforesaid purpose for which invited RFP in August 2005 (including building designs, quotation,
etc.).

4.

In September 2005 after reviewing several proposals, IAIL selected the proposal submitted
by SCC taking all the factors in view and a contract was signed between the two on September
15,2005 which provided:a. SCC shall complete the construction of the project by December 2006;
b. The total cost of the product was Rs. 60 Crore;
c. IAIL will make payment in four equal tranches of Rs 15 Crore each, in October-2005,
February-2006, June-2006 and the final tranche would be paid with the completion of the
project.
d. SCC was required to furnish a bank guarantee in favor of IAIL to cover breach on their part;
which was 50% of the value of the contract i.e. Rs. 30 Crore.

5.

The construction began in October 2005 and continued as per the plan without any delay till
June 2006 as on 10 June a severe damage took place in the top two floors of building due to fire.

6.

The committee set up by the IAIL noted that the fire arose from the position of machinery
kept by SCC, but was unable to conclude that whether SCC was at fault. The committee also
noted that the cost of incomplete construction would now increase by aprx. 20%.

7.

The construction was finally completed in March 2007, three months behind the schedule.
The final tranche of payment was withheld by IAIL owing to this delay. SCC sent a letter on 15
March 2007 to IAIL claiming the last tranche of payment i.e. Rs 15 Crore along with Rs. 5 Crore
for the delay in construction citing clause 11 & 12 of the contract which read as under:

8.

(11) SCC will not be liable for any loss or damage arising out of the work carried out under
this contract;
(12) SCC is entitled to levy extra charges where(a) extra work is required to prepare the project before handing over of the finished project, and
(b) increase in costs arising from delay in completion of project, where the delay occurs from
causes outside the control of SCC.

9.

After tedious proceedings in the court, respecting the order of the court, the IAIL paid the last
trench while the SCC transferred the constructed building to the IAIL. The rest issues over

compensation and defamation are pending before the City Civil Court of Mumbai.
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SUMMARY OF ARGUMENTS

I.

Whether the clause 12 is consistent with the Indian Contract Act 1872 or
rather is voidable due to its non-maintainability and incoherency with the
same?

This Argument works toward making the clause 12 as provided by the SCC in the
contract, null and void, owing to its inconsistency with the provisions of Indian Contract
Act, 1872. It also talks about the limitations and interpretation of exemplary clauses. The
argument also questions the maintainability of the aforesaid clause on the ground that the
India Contract Act itself does not allow any one party to be the adjudicating authority.

II.

Whether there was use of freedom of speech and fair comment against the
non-adherence to essence of time rather than alleged defamation?

The following argument is based on the fact that time is the essence of the contract and
that stating of truth cannot be termed as defamation by the appellant. The argument works
towards removing the allegations of the same. Defamation can never be used as a cover
up for work done in bad faith and the defence of the same comes forward as justification
of truth. The argument builds the ground for removing the allegation of defamation by the
virtue of the same defence and also moves ahead to prove that the time was an essence of
the contract of construction.

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ARGUMENTS ADVANCED

1. Whether the clause 12 is consistent with the Indian Contract Act 1872 or rather
is voidable due to its non-maintainability and incoherency with the same?
The Counsel would like to request the Honble bench to redirect its attention to the paragraph
number ___ which states that SCC is entitled to levy additional charges where extra work is
required to prepare the project before handling over the finished project and the increase in
cost arising from delay in completion of project, where delay occurs from causes outside the
control of SCC. As the bench may be aware that this clause invariably revokes the
interpretation of Section 74 of Indian Contract Act 1872, which does not allow any One
party to be adjudicating authority1.
In a case in Honble Supreme Court 2 a clause in a contract was to the effect that for any
breach of the conditions of the contract the first party shall be liable to pay damages to the
second party as may be assessed by the second party3. This clause was to be held void
because it had the effect of making a party also a judge to decide breach and assess damages.
Also, It is clear that the right of the second party (here appellants) would arise only if the
breach of conditions is admitted or if no issue is made of it. 4 And scrutinised reading of facts
provides that nowhere any breach of duty or contract can be established on the part of IAIL
and hence clause 12, as mentioned by SCC cannot come into play.
Moreover reading the clause mentioned by the SCC in a dissecting manner one can clearly
fall over the fact that it counters the reason for which SCC is claiming the compensation. The
Counsel would request the Honble bench to re-read clause 12 which mentions that SCC will
not be liable if and only if the delay is due to factors beyond the control of SCC. The
respondents would like to know from the knowledgeable adversary counsel, whether, by
going through the facts and common sense, can it be neglected that keeping of machinery in a
non-callous manner falls beyond the periphery of reasonable control by the appellant?
The counsel would also like to point out another provision of the contract act which makes
the aforementioned clause inconsistent with it, and hence void and non-revocable. The clause
in the context falls under the category of exemplary clauses definition of which goes as;
Provision in a contract under which one party is protected from being sued by the other party
for damages, loss, negligence and non-performance etc. Or its liabilities are severely
restricted.5 The contract act, for such clauses provide the maxim of Contra Proferentem.6

Where the words used in an exclusion clause are capable of two constructions, a wider
construction and a limited construction, then the limited construction would be prefered, for
the rule of law is that, every exception clause is to be interpreted Contra Proferentem.7
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Any ambiguity in mode of expressing the exemption clause is resolved in favour of a weaker
party.8
It is also put before the Honble Court that, where exemption clause is exhaustive enough to
exclude all kinds of liability under the contract, it may not exclude the liability in tort.9 In the
present case, to any reasonable person it would be evident that the SCC held a duty to take
care and the breach of same has resulted in negligence, which clearly renders SCC liable. The
expression negligence is defined under the, Unfair Contract Terms Act, 1977, which means
the breach of any common law or contractual duty and thus makes the appellant.
Negligence is defined as breach of any common law, duty to take reasonable care or
exercise reasonable skill10. The knowledgeable bench can very well establish that a
prominent building company owns a high duty to take reasonable care, and keeping of
machinery in such manner as to cause fire, is no way up to that reasonability.
The counsel hence now submits before the Honble bench that clause 12 renders the contract
voidable at the desire of the respondent, and the respondent taking the rule of severability in
consideration, desires to render the same clause void and hence non-maintainable.

1.Avtar Singh, Contract and Specific Relief Act


2.State of Karnataka vs Shree Rameshwara Rice Mills (AIR 1987 SC 1359)
3.Avtar Singh, Contract and Specific Relief Act
4. State of Karnataka vs Shree Rameshwara rice Mills (AIR 1987 SC 1395)
5. business dictionary.com
6. Professor Brian Coote, Breach and Exception clauses
7. Avtar Singh, Contract and Specific Relief Act

8. Avtar Singh, Contract and Specific Relief Act


9. Avtar Singh, Contract and Specific Relief Act
10. The unfair contract terms Act 1977

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2. Whether there was use of freedom of speech and fair comment against the nonadherence to essence of time rather than alleged defamation?

Defamation is the publication of a statement which tends to lower a person in the estimation
of the right thinking members of society generally11as held in Sim vs Strech12. The Counsel
would like to put before the Honble court that speaking of truth and stating a fact can never
be procured as Defamation.
The Hon'ble bench as well as the knowledgeable adversary counsel must be aware that citizen
of India has the right to freedom of speech and expression13 and this right cannot, for the mere
sake of cover up, be named as defamation.
The interview by the CEO of IAIL was a mere critical appreciation of the work done in
collaboration with the SCC. The defence of Justification of Truth and Fair Comment both lie
in favour of the respondent.
The Counsel would like to mention that, In a Civil Suit for Defamation, truth of defamatory
matter is complete defence.14. If there are several charges and the defendant is successful in
proving the truth regarding some the charges only, the defence of justification may still be
available.15 In an action for libel or slander in respect of words, containing two or more
distinct charges against the plaintiff, a defence of justification shall not fail by reason only
that the truth of every charge is not proved.16
The Counsel would also like to revoke the defence of Fair Comment. Fair comment can be
revoked when1. There is a comment i.e. an expression of opinion.17
2. The matter commented upon must be of Public Interest.18
Both the tests are fulfilled by the respondent in all possible manners. The CEO of the IAIL
expressed his comment and not stated a false allegation; over the experience of working with
the SCC Company and that by no means result to defamation, keeping in mind the real noncallous attitude and negligence of the latter.
11.R.K Bangia, Law of Torts
12. 1936 52 TLR 669,671
13.The Constitution of India, Bare Act, Article 19(a)
14. R.K Bangia, Law of Torts; exception 1 of Sec 499 IPC; English Criminal Law
15. The defamation act 1952, England
16. The defamation act 1952, England (section 6)

17. R.K Bangia, Law of Torts


18. R.K Bangia, Law of Torts

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PRAYER

In the light of arguments advanced, authorities cited and evidences produced, the counsel on
behalf of the Respondents would humbly submit before the Honble Court, to grant1. Relief from the allegation and charges of defamation.
2. Compensation for extra cost due to delay caused.
3. Compensation for the loss, both financial and mental.

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